Anyone with a mortgage wants to see interest rate cuts – an extra $100 or more per month relieves the pressure on every household budget. But what happens to Melbourne’s property market when interest rates fall, and what does it mean for new home buyers?
Lower interest rates boost buyer borrowing power, which is especially good news for buyers who were priced out of the market previously and may now get a foot in the door. But more buyers creates more competition in the market, which results in higher property prices.
After the first two rate cuts this year, house prices jumped slightly in approximately 170 Melbourne suburbs. The most recent cut by the Reserve Bank triggered more buyer activity and is fueling another surge in Melbourne’s previously stagnant market, pushing prices higher as stock remains low.
Buyers anticipated the rate cut in July, as data showed an increase in home loan pre-approvals across the country. South Australian and Northern Territory buyers lead the charge – their pre-approval rates spiking 80%. Victorian pre-approval rates were up 46% – a significant increase but a far cry from what most other states experienced.
Economists suggest Victoria’s slower response is due to having one of the worst performing economies in the country and the Victorian government’s disastrous property tax reforms which depleted investor activity in the Melbourne market. But it does provide an opportunity for red-hot buyers to beat the price rise in approximately 190 Melbourne suburbs where price adjustments are slow to occur.
For Melbourne’s eager first home buyers with boosted borrowing capacities, improved borrowing conditions through the Home Guarantee Scheme from October 1st, and a flexible approach to where and what they buy, the time is right.
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